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The Islamic Economic Method

Interest-free Islamic economic system is partly followed and partly not followed inside Muslim countries close to the world. The only country, which often has followed this method completely in each minute detail is usually Malaysia. So the particular application methods in this post usually are mostly those executed in Malaysia subsequent the Interest-free Islamic Economic system.
The main feature regarding the Islamic economic system is that this is Interest-Free. As the Qur’an says in Sura al-Baqara Chapter 2 Poems 278 & 279, “O ye who else believe! fear Thor and give upward what remains of your with regard to usury if ye are indeed believers. In case ye do this not take notice of war from Allah great Apostle: yet if ye switch back ye will have your funds sums; do not deal unjustly plus ye shall not be managed unjustly. “
Qur’an condemn all evil actions, but never offers the Qur’an aware of a war against God Almighty wonderful Messenger other than when it comes to taking Curiosity and Usury.
Right now there are several evils of the curiosity based economy, the reason why Islamic has prohibited this.
For example, if a person will take a loan from the bank and says the cost price regarding a certain post is 10 dollars and he desires to a profit associated with one dollar. So the selling price might include the 10 money cost price one buck profit and one dollar interest plus the selling value will be 12 bucks. The selling cost would go upward because of curiosity so when the selling price rises typically the demand comes straight down and when the demand comes down the supply comes down and as supply comes down production passes down causing labour problem and unemployment.
There exists Social Injustice.
For example , if a person needs a loan coming from the bank plus no matter when he earns a profit or goes in loss he provides to pay that fixed amount associated with interest. Even though a few natural calamity befalls his family, such as flooding or perhaps earthquake, the particular person still has to pay the loan with all the interest and a delay would only increase the amount regarding interest. It is usually social injustice.
There is no sociable consideration.
Suppose, when two businessmen come to ask for a loan from a modern day bank and another business person wants to begin a social or hospital while the some other businessman wants to start an alcohol factory or even a gambling den. But natural the businessman, who else wants to begin an alcohol manufacturer or even a gambling den might have better returns and the loan provided to him might be more safe and he would offer a higher price interesting as in contrast to the business, who wants to open the school or hospital. Modern banks usually are only interested in improving and increased returns. That’s exactly why they finance betting dens rather than schools or hospitals. That will is why within the 80s thousands of gambling dens were financed by simply modern banks around the world. For name reason only a few social projects are usually financed by modern banks and lots of of their loans depend on better interest.
Contemporary banks encourage people to store money and maintain the money nonproductive for small repaired return on this every year. Ultimately, power is focused in a few hands, typically the bankers.
In typically the same way right now there are several great things about Islamic banking.
As there is zero interest involved, right now there is profit and loss sharing. When a person desires to sell their goods, it would simply have the cost price and income inside the selling cost and instead of 12 dollars, his / her selling price would be only 11 dollars. In the event the marketing price comes straight down, the necessity increases in addition to if the demand raises the supply boosts and as provide boosts the production boosts leading to more work for that people and higher employment. Because a result promotes people to job and earn their living.
There is usually Social Justice inside Islamic banking.
If a business needs a loan and goes in loss, the loss is shared by simply the bank plus if he makes a profit, the profit is shared by the lender. If in circumstance any natural calamities befalls him, typically the Islamic bank offers him more time to be able to repay, unlike the present day bank, where the more time you take to pay the particular more interest you would have to pay out. Many a times if the Islamic lender finds the circumstance very bad, these people even let go away that loan.
Presently there is Social Concern in Islamic bank.
Islamic bank are unable to give a loan to any businessman, who else is doing virtually any activity, which can be creating harm to the particular society. For illustration, if a businessman wants to commence an alcohol manufacturer and approaches an Islamic bank regarding a loan, the particular Islamic bank is not going to lend him an individual penny, not actually if he promises to offer 100% revenue to the Islamic financial institution. In Islamic bank there exists social consideration and they also encourage tasks necessary for the community, like building universities, hospitals and nurseries. In a nutshell, the Islamic bank encourages the society to increase.
In the Islamic bank, you are usually not encouraged to be able to keep your cash idle. You usually are encouraged to invest your money and become a partner in the business and within the final, power will be not concentrated inside the hands of a few individuals. Because inside the Islamic banking the profit and loss are shared by the particular business, the company as well as the depositor. Typically the power is similarly shared among all the particular people.
The excellent philosopher, Aristotle offers beautifully defined Interest as “An generating using the use associated with money and never on labour, and all this kind of earnings(interests) are against nature. inch
Enables quickly analyze the particular objectives from the Islamic economic order prior to we analyze the theory and practical application of the Islamic economy.
The Goals of the Islamic Financial Purchase
1- Economical well-being
Islam promotes an individual to enjoy the bounties of God Almighty, to work for his living and avoid begging.
2- Common Brotherhood and Justice
Qur’an says inside Sura al-Hujurat Chapter 49 Verse 13, “O mankind! We all created you from just one (pair) associated with a male and a female and made you into countries and tribes that will ye may understand each other (not that ye may possibly despise each other). Verily the the majority of honored of an individual in the view of Allah will be (he who is) the most righteous of you. “
Out of this we come to know the particular criteria that the particular criteria of judgement in the sight of God is just not wealth, not sexual intercourse, not color, not really Caste, but this is “Taqwa” Lord consciousness, piety plus righteousness.
Qur’an states in Sura an-Nisa Chapter 4 Passage 135, “O ye who believe! remain out firmly regarding justice as witnesses to Allah also as against yourselves or your moms and dads or your kin and whether it be (against) wealthy or poor: with regard to Allah can best protects all. inches
According to this we all have to stand for truth and proper rights be it against anybody even towards our personal selves in addition to sacrifice your personal interests.
3- Fair Distribution of Wealth
Islam is in opposition to the philosophy that will the wealth should be concentrated in a few hands. The particular difference between the particular rich and typically the poor should be decreased. Otherwise they might turn out to be enemies unto each and every other. For this, Islam has created a system of “Zakat” that every Muslim, who has excess riches exceeding the amount the same to or even more than 85 grams of Gold. This amount is put in on the poor, orphans, needy etc. In case every individual on earth practices this method of “Zakat”, not really a single person in the complete world would die of hunger. Islam teaches to discover lawful employment regarding the unemployed and also to pay him a good remuneration.
According in order to Islam if the person dies his / her wealth must be dispersed among his spouse, children or other loved ones according to typically the guidelines laid straight down in Qur’an plus Ahadith and that should not head to just one or two individuals inside the society as it is done these days.
4- Individual Flexibility within the Circumstance of Social Well-fare
According to Islam man is created free and no-one not necessarily even the condition can abrogate their freedom nor subject matter his life to be able to strict regimentation. Every single individual is totally free as long because he does not really harm the society because in Islam the larger welfare of the modern society takes precedence above the individual flexibility.
Working and labour as well as the benefit in business are the two important principles associated with Islam, but functioning and labour take precedence over typically the benefit running a business. In case you are doing business, a big damage can not be inflicted to reduce a small reduction, nor can a huge profit can become sacrificed for a new small profit. In short, Islam believes in individual within the context of interpersonal welfare.
There are mainly four elements involved in production;
1- Land
In both the Modern plus Islamic theories, a person pay rent on the land.
2- Labor
You spend wages within the time in both the Modern and Islamic ideas.
3- Capital
In the Modern theory, you pay Interest on capital, while in the Islamic theory right now there is profit in addition to loss sharing.
4- Organization
In the fourth factor regarding production, Organization, right now there is profit plus loss sharing in both theories.
So the major difference within the four factors associated with production is typically the third factor associated with Capital. The Modern day Theory says that a fixed interest should be billed on the capital, whilst the Islamic concept says that there is income and loss posting on capital. Due to the fact Islamic theory will not differentiate between the third factor Money and the next factor Organization because the money given by the lender does not are supposed to be to the bank itself, it belongs to the depositor. The depositors are the part associated with Organization and the money deposited within the bank (the capital) should end up being included in the Organization. Inside the Islamic theory Capital and Business are clove with each other and there is usually profit and damage sharing on the capital.
When you have to perform business, there are usually naturally two varieties of units. A single is the surplus unit, who have got excess of prosperity, but do not really know how to be able to spend it. 2nd will be the deficit product, the folks who carry out not have money, but have great ideas for business. The best examples associated with a surplus and deficit unit within the Islamic history is Lady Khadijah (may Allah end up being pleased with her) had excess regarding wealth, but lacked avenues to invest in and getting a female the girl couldn’t travel overseas too much to be able to deal in business transactions. The deficit device, with regards to wealth, was Prophet Mohammed (peace be upon him). He had good suggestions and entry to business avenues, but do not have riches. So Lady Khadijah (may Allah be pleased with her) gave wealth, which often Prophet Mohammed (peace be upon him) committed to business avenues on her behalf behalf in addition to the profit had been shared on the fixed pre-determined ration.
The System of Islamic Banking and Contemporary Banking
Lets analyze the options open for individual depositors to deposit their funds in an Islamic bank.
Current Accounts
The money you downpayment within an Islamic bank is utilized with your permission, but if the lender gets into loss, the particular loss is just not shared by the depositor. If the bank gets into profit, none is the profit shared from the depositor. The depositor is interested in only the protection of his money, not profit. Typically the Islamic banks provides you a verify book and a slip book together with the functions because that of a modern bank.
Savings Account
Even here the depositor is principally interested in typically the safety of their money. As the bank gets money through this money, the bank can gift some of that income to the depositor, if the bank desires, but the depositor can not need a fixed part.
In Islamic financial, if a financial institution goes bankrupt then your depositors get their particular money first plus then, the lenders. While in Modern day Banking creditors obtain their money first and majority of the depositors lose their particular money. So also if you need your cash safe, the particular Islamic banks are usually preferable and safer than Modern banking institutions.
Investment Accounts
They are just like the Repaired Accounts of Modern financial institutions and are further divided into several sorts
Mudariba (Profit & Loss Sharing)
The depositor build up a set amount regarding money in the particular bank for a new fixed period of time, which often maybe a multiple of three or perhaps a multiple of four. Here the excess unit is the depositor and the deficit unit is the particular bank. The bank uses this funds to do enterprise with all the businessmen and whatever profit the particular Islamic bank makes, it really is divided upon a pre-determined ratio, which can end up being negotiated. In the particular Islamic Banking regarding Malaysia, the percentage is 7 portion to 3 part, meaning 70% goes to the depositor and 30% is retained by the lender. So there is sharing of profit, the greater the net income the greater the particular share of each.
pemakaman muslim
Suppose, if you have a new loss of a hundred dollars, then hundred will be deducted from typically the depositor’s money. Thus theoretically only the particular depositor bears the particular loss. Practically analyzing even the Islamic bank is going in loss because they are paying money for the rent, administration in addition to salary, nevertheless the damage ratio from the lender is less as compared to those of the depositor, as even typically the profit from the bank is less than regarding the depositor.
Project Financing within the Mudariba Program
If a business person approaches an Islamic bank with a project idea and requests a mortgage for a fixed period, the Islamic bank analyzes the project, then the particular businessman and typically the Islamic bank make a deal the profit percentage. In Modern financial interest is agreed, in Islamic bank profit ratio will be negotiated.
Suppose, the businessman takes a loan of $5000 from your Islamic lender for six weeks and the pre-determined profit ratio will be 60% to typically the bank and 40% towards the businessman. If the businessman is working for their business, even their salary would become a part of that $5000 and suppose the particular salary of typically the businessman is one hundred dollar per month.
Assume, if the businessman earns a income of $5000, typically the business would get (his 40%) $2000 from the profit in addition to the businessman might get paid $200 salary per 30 days from the $5000 loan, amounting $1200 regarding six months. So the particular businessman gets their profit along with the wage for his labour, if he is functioning for his enterprise.

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